Should You Consider Applying for Hardship?
How to apply for Hardship Arrangement?
Applying for Financial Hardship is as simple as contacting your lender and requesting them to vary the terms of your contract so your mortgage payments are more affordable in view of your current circumstances.
Before you approach your lender or service provider with a request for a hardship arrangement, you should work out exactly what you are able to afford to pay based on your current income and expenses.
This may require documenting a budget to work out what an affordable repayment is. It is important that you don’t promise something that you can’t deliver. If you have no income currently, estimate how long you expect for it to take for you to return to work.
If you wish to make a hardship application it is advisable to do so in writing or over the phone. If you do so over the phone, request that everything you agree to is confirmed in writing.
Keep your lender informed if you cannot maintain a payment plan you’ve agreed to. If you do not communicate with your lender and fail to abide by the hardship agreement your home may be repossessed or your creditors may initiate bankruptcy proceedings against you.
Advantages of a Hardship Arrangement
The main benefit of requesting a hardship variation to your credit contract or a hardship arrangement with your other creditors is that your credit history should remain intact providing you maintain the new repayments as agreed via the hardship arrangement;
The secondary benefit is that you are not being chased by creditors looking for repayments which you are unable to make – alleviating much of the stress associated with this already difficult situation.
Disadvantages of a Hardship Arrangement
While a hardship agreement gives you some breathing space while you are experiencing financial hardship – you will still have to repay your debts eventually. If your creditors don’t agree to freeze the interest on your facility, this will extend the term of your agreement and you will probably need to repay a larger amount.
Hardship Arrangements are temporary and are subject to review at regular intervals. If your new financial situation is semi-permanent you are unlikely to find the kind of relief you require from this strategy. You may wish to consider other options like informal arrangements, debt agreements, personal insolvency agreements and bankruptcy.
While Financial Hardship arrangements do not damage your credit history, any lender that refuses to offer you financial hardship consideration may consequently contribute to you falling behind in payments and therefore adversely affect your credit history.